The first steps to starting a consignment business – Step 1

March 20, 2015

Where should you begin when starting a consignment business?

Whether you are just dreaming about your shop or you’ve been in business for awhile, creating a sound Business Plan is essential to starting a consignment business. Look at it as your foundation. A Business Plan is what you build on and it should grow with you. If you have already created a Business Plan, drag it out and dust it off. Make sure you are meeting the goals and standards you originally set for your shop. If you haven’t developed a plan yet, now is the time. It’s the first step to starting a consignment business.

Developing a Business PlanSuccessful consignment Business Plan

A business plan outlines the vision and shows you the steps to take. The time you invest in creating this document will save a tremendous amount of money. According to, a consignment clothing store requires $4,000 – $10,000 to launch and it takes 2 years to work out all the kinks. Minimize these numbers by carefully considering your business structure, policies and relationships with consignors.

There are some great online resources that can give you detailed information on how to craft an exceptional business plan. Let’s take a look at some of the most important ones as they relate to creating a consignment shop.

Important elements to consider when just beginning

  • Financing – You will need to have most of the financial details sorted out before starting a consignment business. Where will the money come from to start the shop? Do you have personal savings? Will you need to secure a bank loan or can you obtain private investments? You need to consider overhead expenses including rent, utilities and employee salaries. Also, consider other start-up expenses including shelving, tags, bags, a cash register, signage, and inventory. You will need to estimate how long you can stay in business with no additional funding so that you give your store a fair chance of turning a profit. Again, the Small Business Administration offers some great resources for starting a consignment business.
  •  Return on Investment – When do you expect to turn a profit? A realistic goal might be six to twelve months depending on your inventory, location and competition. You will also need to decide how to pay yourself. Will you draw a monthly income or will you pay yourself quarterly?
  • Incorporation – Deciding how to structure your small business can be difficult. Most resellers choose to become sole proprietors. However, if you have a business partner, you may want to consider an LLC since this will protect you from personal liability issues and paying double taxes.

Important elements to revisit after you’ve been open awhile

If your shop has been open for awhile, reviewing your Business Plan is key. Entrepreneur recommends a thorough update every year. After all, a Business Plan is about your future not about what happened a few years ago.

  • Financially – Have there been alterations to your overhead costs? Are your revenue sources meeting those demands? You may need to restructure your current funding and even add some additional. If refinancing is necessary, your lender will often require an updated Business Plan. Do you need to adapt to meet the changes within your demographic area, shoppers, trends, etc.? How about your consignment software? Is it still meeting the demands of your growing business?
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  • Return on Investment – Have your priorities changed? Have you reviewed what your customers are buying and honed your niche in the market? Are there new ways you can segment your business to reach new markets?
  • Change in Structure – Many consignment shops are family-owned businesses or shared with a friend. When a family member or friend enters or exits the business, a review of the Business Plan becomes necessary. Are you prepared for the expense of adding someone new or even the possibility of buying someone out?

Now’s the time to move on to Step 2 of starting a consignment business!       


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